Advocating IP Protection as an Aspect of National Competitiveness 

 

By Edward J. Kelly

 

A. Sources of Thai Law

 

The Kingdom of Thailand is a constitutional monarchy with His Majesty, the revered King Bhumibol Adulyadej as the Head of State. Thailand is a civil law jurisdiction which borrows elements from the common law in respect of IP enforcement. Thai law is essentially informed by German law and Japanese law. Elements of common law exist to fill in gaps in the civil code. For example, we have the ability to petition for and obtain Anton Pillar orders (a civil search and seizure tool), which is an unusual provision to find in a civil code jurisdiction, given the unusual discretion that may be exercised by a Judge sitting in the Intellectual Property Court. Normally, in Civil Code practice, judges are “legal scientists” and have less discretion to apply an ad hoc legal device in interim circumstances. 

 

B. International Agreements

 

Thailand is a member of the Berne Convention when it comes to copyright. Thailand is a signatory and member of the World Trade Organization (“WTO”), so we are a signatory to the TRIPS Agreement relating to IP protection. We recently acceded to the Patent Cooperation Treaty (“PCT”), although it has not been implemented yet. Likewise, we are in the process of also acceding to the Madrid Protocol on trademark administration although that has not yet been implemented yet either. Implementing these treaties will allow Thai companies streamlined access to register IP assets in other countries around the world. Resistance to the Treaties historically was rooted in Thailand’s unique pride in its national sovereignty, stemming from the fact that Thailand is the only country in SE Asia never to have been colonized by a foreign power.

We have also just recently acceded to the Paris Convention. One of the requirements in implementing this treaty is to develop local legislation addressing unfair competition, similar to the Japanese unfair competition law. We do not yet have a dedicated unfair competition law, so there is an open question as to whether or not we are in full compliance with the Paris Convention at the moment. 

 

C. Policy Controversy

 

We are in the middle of a controversy right now as to whether or not Thailand is in full compliance with TRIPS, in respect of TRIPS rules allowing a member country to impose compulsory license to break patents. We are one of the few countries in the world that has implemented compulsory license under color of the so-called “government use: rationale to break a number of patents for pharmaceuticals. 

The Ministry of Public Health (“MoPH”) of Thailand announced on November 29, 2006 (a few days before “World AIDS Day”) its decision to force MSD Thailand Ltd. (a subsidiary of Merck & Co., Inc.) to relinquish its patent and intellectual property rights on efavirenz, known by its brand name Stocrin®, an effective HIV/AIDS treatment and to produce the drug itself through the Government Pharmaceutical Organisation (“GPO”). This “first strike” policy was invoked despite the fact that MSD Thailand offered Stocrin® at no-profit pricing in Thailand. Thailand was one of the world’s few ‘middle income’ countries receiving the drugs at the no-profit price. 

Later, on January 29, 2007, in another announcement timed to coincide with Thailand’s hosting of an international conference called the Prince Mahidol Awards, the MoPH extended its policy of CL to break patents relating to Abbott’s Kaletra®, an anti-HIV medication, and sanofi-aventis’ Plavix®, a cardiovascular drug.

The then military-installed regime putatively relied upon a section of the Thai Patent Act (Section 51), which historically had never before been invoked, that it contended allowed it to compel companies to license the government to produce patented drugs for governmental non-commercial use under terms and conditions unilaterally set by the government.

Questions have been raised not only about the due process that was afforded to the patent owners in implementing compulsory licenses to break patents, but also as to whether the substantive requirements for implementing compulsory license under TRIPS have been met. That controversy is alive and well, although not yet being litigated. It is being discussed and disputed at the political level. 

Patents perform an essential role in stimulating the development of essential drugs, including HIV/AIDS drugs, by offering incentives for investing in expensive and long-term research and development of new drugs.  Without patents, existing HIV/AIDS drugs would not have been produced, and new and better drugs that are needed to overcome the increasing resistance of the AIDS virus would not be developed. Merck’s new vaccine Gardasil®, produced as a result of research in Australia, would not have been available to prevent HPV and cervical cancer in females without the funds needed to support such research. The question of how to assure long-term access to new and innovative drugs is often ignored in favor of arguments addressing only short-term immediate access to affordable drugs.

At the same time, the patent system also contributes a disclosure function to society as a whole by accumulating and making available state of the art human knowledge to fight against diseases. But it was the issue of patented medicines, more than any other issue, which largely stopped the FTA negotiations from proceeding between Thailand and it’s number one export market, the USA.

 

D. The Unpredictable Nature of Thai Politics

 

Thailand will be a very unpredictable market for the next two to three to maybe even five years, because we have a political crisis here. The rural poor of about 55 million have a power base set in one or more political parties, whereas the urban educated elite has their power base set in essentially one political party. Those political parties are struggling and fighting over who will have power. We had a coup d’etat in 2006; we had bloody street protects and protestors taking over our airports as recently as December 2008. Politics is the biggest factor that makes the Thai market hard to predict, in terms of what to expect for IP and economic development policies. 

The current administration is a Democratic administration; Democratic in the party sense of the word, not in the Greek sense of the word. The Democrat Party is in power. They generally represent the urban educated elite, and tend to be pro-business. In my opinion, they tend to be a bit more far-sighted in terms of their policies, less pandering to popularism, but that could change at any moment, given the status of protests in the street. For example, if a critical mass of protestors marches in front of our parliament, as has become increasingly common, and starts to campaign against the high price of goods protected by IPR, then it would not be surprising for even a pro-business party to roll back IPR protection, as a practical matter, and tolerate or even foster the entry of cheap copies into the market. 

My advice to IP practitioners and IPR owners with interests in Thailand is to maintain constant vigilance as to what is happening with the political scene. Be very flexible and adaptive, and try to get things done in Thailand not so much through standard routine boilerplate legal strategies, but to use creative strategies based on out of the box thinking and the importance of developing effective working relationships with enforcement authorities. For example, it is critical to maintain relationships with commanding officers in the police, in Thai customs or other law enforcement agencies, through training, positive reinforcement, and constant support. In Thailand, as in many countries, the local practice prevailing in the law enforcement community is not necessarily identical to the policies and procedures written in the books. In the eastern culture, it is far more important to develop effective working relationships, rather than to rely on what the prevailing policy might be, because the policy changes with each new incoming administration, while relationships, when supported with vigilant and positive feedback, tend to last no matter which Minister is appointed or which government is elected. That is a general truism in Thailand: you get more done through positive working relationships than through whatever the written law or policy may be, because the laws and policies are generally selectively applied or subject to discretionary and/or sometimes arbitrary interpretation. 

 

E. IP Enforcement: Key Players

 

When it comes to IP practice, in terms of the bottom line of being able to secure tangible results for IPR owners, Thailand has an interesting dynamic, where we seem to take two steps forward and one step. We have some fairly progressive institutions in Thailand, like the Department of Intellectual Property under our Ministry of Commerce, which is charged with developing policy for the country. I would characterize the Department of Intellectual Property as a success story and a progressive organization, although with less practical authority for enforcement than what is needed to carry out any true mandate. We also have the specialized Intellectual Property & International Trade Court, the Thai equivalent to the U.S. Federal Circuit of Federal Appeals. This means we have a specialist bench that understands IP and patent issues. Thailand’s IP Court is a one of only a few such specialized courts in the world. It is a model to a number of jurisdictions. Malaysia is considering having one and Japan just implemented one, so Thailand was ahead of the curve on that type of initiative. 

 

F. General Attitudes

 

What I mean when I say we sometimes take a step back on IP is that political forces in the country tend to be, in a very general sense, anti-IP, because the average man on the street, the voter, considers “IP” actually to be “OPIP” – Other People’s IP. Unfortunately the average Thai citizen does not consider IP to be a Thai national asset, they consider IP assets to be foreign owned assets with inflated prices, and they feel that laws protecting IP operate to the advantage of foreigners. Whenever elections are called, some politicians inevitably tend to pander to nationalist populist elements by trying link the strength and enforcement of IP to high prices of goods and services, thereby making it more difficult for foreigners to enforce their IP; because enforcement becomes less of a priority for the police and law enforcement to engage in police raids and investigations into counterfeiting businesses or infringements. The result is there is little political will to really clean up the market. Scapegoats are often accused of the offences rather than the real big fish funding or organizing the criminal activities, with the result that the courts are reluctant to issue significant fines or penalties for clear violations of IP laws. No one, except in the rarest circumstance, goes to jail for commission of an IP related offence.

That tension plays itself out in any number of ways. For the average Thai, vigorous enforcement of IP rights is not seen as something that is advantageous to them, because they (wrongly, in my opinion) are led to believe that they are generally not creators and inventors, and therefore they do not get any benefit from IP. I strongly disagree with that, and I have seen many examples of Thai creativity and invention and work. We represent many Thai companies in registering patents and trademarks and understanding the value of branding and things of that nature. His Majesty, the King himself, is an accomplished inventor, musician and artist, and owns patents around the world. Our King has received awards from the World Intellectual Property Organization (“WIPO”). However, negative attitudes about IP represent the prevailing perception, and this perception is used by politicians to get elected in office.

 

Experience in Practical Aspects of Thai IP Law 

 

I think lawyers who only dabble in IP law and this sort of thing probably do more harm than good. If you are going to practice IP law, you have to do it on a full-time basis, and you have to make it your mission in life and try to map out the big picture. 

Case in point: I have done work in a number of copyright piracy and trademark counterfeiting cases involving a Laos national operating out of Thailand, sending CDs from Bangkok to one or more of the street gangs (eg., the 18th Street Gang) in LA. They are basically trading the CDs for cocaine. I worked for 1.5 years on that case, and I had the whole network mapped out, up to the point of finding who the captains were in the gangs who were directing the operation. For some reason, a very low-level operator in the 18th Street Gang was also coincidentally involved in selling fake chili sauce. There is a very popular brand, and he was either using empty bottles of chili sauce and refilling/reselling them with his own version, with the fake chili sauce inside or producing fake versions of the bottles themselves. He was such a low-level operator and there was really no strategic value in arresting him, but another lawyer, unrelated to my case, who was not aware of the bigger picture and who did not do this full-time went after him, sued him, and seized the chili sauce. That ended up alerting the more important leadership elements in the gang that they were under surveillance, and basically allowed them to hide evidence and elude law enforcement on what could have been a major case of illegal trafficking.

My advice is to leave this kind of work to the professionals; namely to sworn law enforcement and people who are trained for it, supported by IP lawyers who work day-to-day on these types of cases everyday and have the big picture in mind. I am never against a lawyer representing a client, trying to make a buck and trying to do good by their client, but many times the lawyers who do this on a one-off basis or on a less frequent basis miss the entire bigger picture. They end up complicating much larger investigations, and that is very frustrating. 

There is no question that the Internet has been a boon to organized crime, because they are able to communicate more efficiently, to take orders from abroad, and ship goods, for all the same reasons that legitimate business relies on the borderless Internet. Because of the obvious scale and cost-reductions created  through the Internet, organized crime also benefits. On the flipside of that, the Internet is also a critical tool for law enforcement, because there are a number of different ways we can track and investigate ongoing criminal operations through, for example, tracking of IP addresses from e-mails, getting warrants to obtain telephone records and bank account records, etc. If during a raid we happen to seize computers, we can get into the hard drives and basically capture all the data on them. What I am suggesting that is with the increased technical skill of IP lawyers, specialized investigators (such as Rob Holmes from www.ipcybercrime.com) and specialized law enforcement teams, the competitive advantage of the Internet might end up being a wash; the advantages to the infringers probably will be neutralized by the advantages available to law enforcement.

 

A. Emerging Trends

 

In terms of IP issues, I would say the trend 10 years ago was that Thailand was one of a number of countries that was a leader in the low cost manufacture of fake and pirated goods. Thailand has since that time moved up the value chain in the counterfeiting business by becoming more of a logistics and trans-shipment and distribution hub, although you still find large-scale manufacturing here. Now the overwhelming volume of cheap fake goods are generally made in China, and the gangs involved in transnational trade in fakes use networks that are present in different counterfeiting hubs or “hot spots” around the world. Thailand is one of them, others being Dubai (UAE being ones of the 26 countries that I am presently monitoring for trade in illicit goods by organized crime), the Tri-Border Area in Ciudad del Este where Brazil, Paraguay and Argentina meet, Russia, Turkey and South Africa. Goods are shipped to Thailand either as unfinished goods or mis-described as something else in a container. Then the actors in Thailand will either finish the goods or repackage them or further disguise the origin of the goods, so they can trans-ship them to other countries around the world. 

That is why it is not unusual to find Thai-made or Thai-handled fakes in countries as far away as Chile, Mexico, Belgium, Russia, virtually any country around the world. That is not because the goods are being made in Thailand, but because they are being shipped through Thailand with their origin disguised. Customs around the world have a high degree of suspicion of goods coming from China, so if counterfeiters can make it look like the goods are not coming from China, they tend to allay that suspicion of customs agents. Moreover, exports from developing countries, or countries with Free Trade Agreements, might have advantages in terms of the duties levied by the receiving country that China does not, allowing more margin for the counterfeiters if they can disc=guise the source of the goods as being from somewhere other than China. I would say the main trend is a shift of Thailand from being a producer to being more of a value added logistics and distribution hub. 

Another trend we see could almost be considered an invasion of foreign actors moving to and living in countries with loose visa rules and , shall we say, a relaxed rule of law when it comes to IP enforcement. Thailand, a very pleasant place to live and do business generally, is also confronted with the problem of foreign operators taking advantage of the lax law enforcement to trade in fakes. In beach paradises like Pattaya and Phuket, counterfeiting operators assume they can make quite a nice living staying here on endlessly renewed tourist visas and establishing trading businesses through Thai proxies, usually Thai girlfriends/boyfriends, Thai wives or husbands or paid nominees. 

The risk to the foreign operators seems to them to be minimal, because if the police investigate superficially, usually they find only Thai names associated with the trade, they rarely find the foreigner. The foreigner is a ghost, he is a financier, but not the person with the fingerprints on the operation. We have done numerous raids in Bangkok, Pattaya, and Phuket, and we have found surprising numbers of foreign surnames popping up during the raids: Russian, Pakistani, British, American, Algerian, Nigerian,  Iranian. So while Thailand chafes at the identification of the country as a hub for organized crime, I think the evidence is very strong that we do have organized criminal gangs operating almost with impunity in Thailand. A significant volume of the trade they are involved in is clearly in counterfeits. They are also involved in other related illicit trade like trade in weapons, drugs, human trafficking, and things of that nature. I would characterize that as a major trend. I don’t mean to single Thailand out by any means. The trend is global, the dark side of globalization.

The last trend I would highlight is that in the last 10 years, our courts generally have been willing to use the criminal justice system to address problems of counterfeiting and infringement, so that the remedy of choice for most IP rights holders would be to bring criminal action against infringers. In the last two years, the courts have demonstrated a serious and undeniable change in philosophy. The judges have tended to be more liberal politically, and view the use of the criminal justice system against infringers as draconian. They have severely cut back on the number of search warrants and the ability of rights holders to obtain search warrants to conduct criminal raids. So the option of pursuing these criminal characters with criminal remedies has been reduced dramatically. Recent changes in the makeup of the bench suggest though that trend may be reversing itself. I hope so.

Restricting criminal raids would, I suppose, be fine if there was a balancing change in the ability of IP rights holders to bring civil actions, to be able to sue these counterfeiting actors and obtain significant damages awards and then knock them out of business, taking their assets, for example. That is what happens in the U.S. In the U.S., you almost never bring a criminal action for infringement; you sue the infringer because you can get up to three times the damages amount in a damages award, and that usually cripples the organization financially. You essentially have the U.S. market being policed by lawyers in the civil courts, suing for damages. We do not have that in Thailand. We have civil actions, but the damages awards tend to be negligible, so we are really in a Catch 22, where we are now restricted in terms of our ability to have criminal actions taken against infringers, and we do not have the alternative, as a practical matter, of using the civil justice mechanisms to sue the infringers out of existence. 

 

C. Risk vs Reward

 

The infringers know counterfeiting is virtually a risk-free operation, and of course through the power of blogs and web sites and things like that, the word has spread. I think that is probably one of the leading factors as to why we see so many foreign criminal gangs coming to Thailand, where they know it is very high reward, profitable activity and very low risk.  If you get caught with a kilo of heroin in Thailand, there is no doubt you will spend a long and very uncomfortable stretch of time in prison, and prison in Thailand is not somewhere anyone, even the most hardened criminal, ever wants to be. But if you get caught with a kilo of sildenafil (the active pharmaceutical ingredient in Viagra® ), the sale of which may likely bring even more profit than the sale of a kilo of heroin, the counterfeiter faces virtually no risk of prison time and will probably get slapped on the wrist with a nominal fine, and walk away to do business another day.

These trends present a number of challenges. We can no longer just go about handling these cases in any kind of routine, cookie cutter way: where historically you would file a complaint, go to the police, seek a search warrant, go with the police to the site, seize goods, and then prosecute. That was the way it has been done for years, and it got to the point where it was relatively routine to count on a certain number of raids and a certain level of suppression each year. 

Now at the present time what is required is a level of creativity that is obviously still being refined. As the counterfeiters get better, we are trying to get better. One of the approaches that I have found to be useful is instead of looking at legal cases as an end in itself, we use the legal system as part of the strategy to create the deterrence and suppression in the market. The fact that at the end of two year criminal prosecution, you may successfully obtain a judgment of conviction is not as important or as useful as using the legal system as part of a broader holistic strategy to create real deterrence in the market. 

 

C. Fighting Fire with Fire: Using Networks to Catch Networks

 

We have spent an inordinate amount of time and money over the last 2-3 years to develop what is essentially an intelligence network relying on informants on the one hand, and cooperation with law firms and authorities in other bordering countries or trading partner countries, to share information to map out the big picture. The approach is the same approach developed by law enforcement agencies around the world to monitor what may be considered more “serious” transnational crime such as trafficking in arms or narcotics. 

We need this kind of intelligence to bring the scale and scope of the international criminal networks into sharper focus. The reason is that we are finding that in many circumstances, the same people are involved in the networks, whether they happen to be trading in fake purses, fake pharmaceuticals, or real weapons and narcotics or human trafficking. The networks’ expertise is not necessarily compartmentalized in terms of the type of goods that are being trafficked. The skill set of these networks is that they can move anything, anything, from point A to point B to Point C. The profit comes from the value add in being able to assure a secure supply chain of whatever illicit product for which there is demand.

The informants range from street operators to owners of trading companies who have been arrested and flipped to give us information in exchange for non-prosecution, to law enforcement officers, to customs agents, to airport personnel, to flight attendants; virtually anyone who has the ability to observe what we would characterize as suspect shipments of goods from Point A to Point B to Point C. We use this network of intelligence to basically keep us informed of what is happening in the market. We in turn use that intelligence to offer positive reinforcement and constant support to local law enforcement to try to approach the problem on a more holistic level. 

Of course we still go after low-level operators, but really just as a show of force and as a way to recruit informants. The more important strategy is to watch the low-level operators, see where their sources of supply are, and try to follow the chain all the way up to the producers and the financiers. Our shift in strategy has really been one to change the techniques of detection, use the intelligence network model to develop better information to act on, and then reserving legal action for cases where there is proven cost effectiveness and return on investment. Law firms get in all sorts of trouble with their clients when they spend $50K on an infringement case and recover $5K. I used to be in-house counsel with an American company doing this. I know that in-house counsel will quickly fire a law firm if that is the standard operating procedure, so I try to do the reverse. If they give me $5K, I try to get them $50K. We use recoveries, we use the funds from recoveries to fund additional operations so we can save somewhat on the client’s expenditures. Budgets, especially in these times, are hard to come by. I would say that is the greatest adaptation that we try to implement. 

I do not see a lot of other firms doing that. It is a very difficult long term and tedious, sometimes dangerous, process to develop an informant network, because of the nature of the people you are dealing with. They are not very trustworthy, so it takes a long time to build the credibility and trust you need to get the information, to make sure those informants are protected and are not going to be harassed once our case is put in place.

The second main challenge is that I have seen an increase in the level of defense employed by these organized criminal networks. Obviously they do not operate by any set of laws. I have had my computer hacked, my cell phones stolen, my SIM card stolen, my apartment broken into. My wife, a Thai national, has been followed and threatened, and my Thai brother-in-law has had a gun pointed at his head. The level of thuggish activities in organized crime that you expect to see in the movies, I actually see that now. 

One part of me finds it absurd, because we are seizing, in the case of a low level example, 400 pairs of fake jeans. Is that really worth getting your life threatened? I wonder about that sometimes, but the fact is these people do not fight back in court. Anyone who is in this business, at least in the developing world, has to be aware that they do not fight back in court. The U.S. and other developed “law and order” jurisdictions may be a little different, because you have the FBI involved, you have highly trained and motivated police involved, and the justice system is a lot more vigorous. But in countries like Thailand, where the judicial system is relatively weak at least for this type of activity, both lawyers on the good guy side and operators on the bad guys side tend to resort to self-help, and that is outside the system of law and that’s just  part of the game.

 

Client Strategies for IP 

 

IP cases can, if handled effectively, resolve themselves within a matter of weeks, yet of course I have also had investigations that have lasted three or four years, so the actual timeline involved in handling an IP matter depends on a lot of factors. It depends on what stage of production and distribution the counterfeit operation is in. If a particular brand is just now getting hot and the networks are just beginning to gear up for production, it is much easier to stop them early because they do not have as much money invested in their project. If they already have a lot of money invested and have gone through some production runs and paid off corrupt actors and distributors around the world and hired shippers, then it becomes more difficult because they have a bigger investment to protect. My advice to the client is get in as early as possible and do as much as you can as early as possible to stop the infringement, because the longer you let it go, the more difficult it is going to become. 

Thailand, a country obviously much smaller than China, nevertheless presents a disproportionately large challenge to IP rights owners because of its role as a manufacturing and export hub for fakes. Thai law enforcement and Customs have responded to the calls for more effective action against the trade in fake goods, particularly in the automotive sector, where Thailand seeks to attract foreign direct investment as a hub for automobile and light truck manufacturing.

For example, in October of 2005, an elite Thai law enforcement unit, the Department of Special Investigation or “DSI”, seized some 50,000 counterfeit automotive parts and accessories bearing unauthorized trademarks of Mercedes Benz, Chevrolet, Honda, Saturn, and BMW.  DSI officials estimated that the seizure of parts and equipment was valued at more than one billion Thai baht (over USD $25 million).  The raid was one of the largest of its kind in Thailand’s history of intellectual property enforcement.  

The October 2005 raid also uncovered more than 50 operations using signage and trademarks of DaimlerChrysler so as to have customers believe that they were among the network of authorized dealers and service centers when in fact the operations had no commercial relationship with the company.  This unauthorized use of trademarks presents just as much risk to the consumer as the trade in counterfeit parts, because, again, there is no guarantee of quality in the provision of services by unauthorized dealers. 

Another recent series of raids by DSI resulted in the seizure of nearly 1100 fully assembled motorcycles worth more than $1.2 million from a Malaysian-owned factory in southern Thailand.  The motorcycles were seized under the authority of the Thai Patent Act because they were slavish copies of patented Yamaha designs and inventions.  In fact, the motorcycles were virtually indistinguishable and many of the parts were completely interchangeable between them. 

Where you see a case of copying and infringement on the scale of the DaimlerChrysler and Yamaha cases discussed above, you need to hit the operation hard and early before the networks have scaled up. One way to motivate local law enforcement is to demonstrate that counterfeiting on this kind of scale adversely impacts Thailand’s ability to attract R&D operations and foreign direct investment. What investors seek, and what high tech ventures need, is a level of security and confidence that the resources devoted to innovation and creativity will be protected so that an adequate return on such investments is possible.  

 

A. First Things First

 

When I first meet with a client over an IP matter, I like to know everything about the product that I can; everything about how it is made from raw material, all the way through to finished product. I like to know what kind of equipment they use and what molds they use. I would like to see the factory if I can, and whether they have any kind of built-in security features or whether they are open to including security features. Even supposedly “low tech” garments and shoes have very sophisticated security features that make it a lot easier to detect when an item is counterfeit, versus when it is real. 

I like to understand their marketing strategy and understand their price points and how they came to the price point. The more I know about their business, the more I can profile who is likely to get involved in a competing business and how they are likely to make shortcuts to save money so they can increase their profit margin by selling fakes. I tend to take a very businesslike approach to the client’s business, and then I apply what I know about how criminal gangs operate and use profiling techniques to try to match up what I think the counterfeiters are going to do and how they are going to try to rip off a particular item.

Culturally, it is important to involve an owner’s local Thai licensees, agents, distributors and dealers of protected/branded goods in any enforcement campaign. Local influence and connections could be useful in facilitating anti-counterfeiting actions. Furthermore, Thai people and Thai government officials are more likely to listen to the complaints of Thais than of foreigners.

I cannot say that there is any kind of cookie cutter strategy for meeting clients’ needs. My strategy is really tailored to each individual item or each individual case. There are so many different factors that it would hard to list them, but I think generally I want to emphasize that the approaches are personalized and they are tailored to what the client is doing and what the legal-commercial needs are. 

Some of the factors to consider in developing a strategy or approach would be to understand if the client is using contract manufacturers, if they are using a sourcing company to be its buyer and then to map out where that sourcing company does business, where does it go to find factories in China, for example. Have there been any disputes with the contract manufacturer. A common sense analysis of how that manufacturer can profit if its margins appear to be razor thin. Is there room to cheat? What quality control mechanisms does the client have in place? What shippers does the client use to get goods from Point A to Point B to Point C? Are they using sea freight or air freight? What kind of retail outlets are they using? Are they using high-end boutiques or corners in stores? There is just a host of different factors in how the legitimate business is carried out that will determine how we react in looking for the counterfeits in the marketplace, and once we actually find them in the marketplace, how we track them back up through the supply chain to their producers and financiers. 

After a number of years, you get a feel for this process, just based on experience; a feel for who is doing what. I have an ongoing case with a famous apparel brand, where the brand is justifiably concerned about its new roll out for football jerseys for the 2010 World Cup. A significant percentage of the football jerseys they will make will be made in SE Asia, so they are worried about leakage of designs and fabrics and photographs of how the eventual football kit will actually look. Once it gets out of the zone of trade secrecy, then someone can very quickly make cheap knock-offs. Because I have dealt with football jerseys for the last eight years, I can generally predict with almost 80 percent accuracy which trading or shipping companies are going to be involved in shipping fake goods from Thailand to different countries. For example, I know exactly which shipping company is going to be involved in the fakes that end up in Africa. I know where they are, I know the personnel and the operators and the owner. I have informants watching them, not just for this brand, but for all other brands in that particular industrial space, so if they do get involved, I should know within a couple of days. This world is such a small world that they know that I know. They really don’t hide very well. They just think they can do a late night delivery run and catch the brand’s agents unawares or off guard. They are outright arrogant in terms of the impunity with which they operate. 

Bangkok is a big city, but it is not that big, where you can tend to see the same people in the same locations and you start to recognize each other. It is kind of like a game of cat and mouse. If we are investigating, I know exactly where they are hiding their stuff. I know when they are busy, because I can see the number of boxes they have in their back storerooms. I can use a pretext or an investigator to get in there and pose as a buyer and see how much they have. A game of cat and mouse or chess is the best way I can describe it. Now I may be twisted because many times I do this just for fun, I am not billing the clients for the action. I genuinely want to understand how the gangs operate. Through experience, you just end up being able to identify who the most likely players are in a particular operation. It is just a process of elimination; if it is not A then it is B or C. Of course, that information is very closely held by investigators and law firms, because that is the value add that we offer to clients so that we can scrape out a living too. 

I think clients that have been at this for a while understand that in cases of widespread counterfeiting or piracy, the objective of completely eliminating the problem is probably unreasonable. Their objective is more likely to be harm reduction or a type of maintenance or suppression. That certainly can be done if the program is designed right. Some clients view counterfeiting as a nuisance or an annoyance. They let it go for a year or two, and then all of a sudden the problem spins out of control and their brand endangered. For example, Von Dutch or Diesel or a few others actually did not mind that knock-off products were being sold at flea markets. They saw it as sort of free advertising, but later on when the problem mushroomed and you could find the fakes in every market around the world, they realized that if they spent money chasing all these fakes,  they would burn up in the atmosphere and never make another nickel from selling their genuine goods. 

Clients have to recognize early that even with the first sightings of fakes and markets, no matter where they see them in the world, they have to act at the beginning stages, when the counterfeiting is just beginning to penetrate the market. It is so much easier to roll up the operation and actually put a stop to it when the counterfeiters are just testing the market. I think brand owners that understand that counterfeiters operate just like a Fortune 500 company tend to do well. Why? Counterfeiters have horizontal organizations where they have expertise in everything from production, logistics, HR, warehousing to bill collection and security; they have a CFO and CEO, financiers, bankers, and lawyers. The skill sets you will find at these operations are the same skill sets you find at a Pfizer or Nike or Adidas. It is all about the people. 

When they make test runs into markets, they are just testing the validity of their business model to see whether a product will sell. That is like a marketing outreach, and if you are able to convince the counterfeiters early on that this product will be closely watched and seized wherever it is seen, and the brand owner is very aggressive when it comes to this particular item, the organized criminal syndicates react rationally. They see their risks are increased and their rewards are reduced, and they will move on to some other item that has lower risk and higher reward. It is a very rational process, a very businesslike process, where they react to the messages being communicated in the market. 

If they see they have an open territory, where no one watches the brand and goes after them, or cares about the counterfeit, they see there is no risk and they will exploit that. But if you are aggressive early on and you take the profit out of it early on, if you watch them, harass them, sue them and bring them into the court and they have to pay legal fees and damages, refer them to the tax man, generally make their lives difficult, then that particular item is not profitable for them anymore and they will drop it. You have to look at it just like it is a competitive business. The strategies you would use to knock out a competitor are much the same strategies you can use against the counterfeiters, but you also have additional options like the criminal laws to use against the counterfeiters. 

 

Demonstrating Leadership

 

Decisions made by international organizations have an impact on how IP law and enforcement are viewed. For example, in my opinion, the Doha Declaration and so-called TRIPS flexibilities that have been agreed on may certainly have an effect on countries in the developing world, because, while certainly there are valid policy reasons to carve some exceptions to enforcement of IP rights, when the exception becomes the rule it sends a message to the developing world that they do not need to strictly apply some standards, for example, patentability, because they are developing countries. Thailand is not really a developing country, we are a middle income country; we have a lot of poor people, too many, but we are not a poor country. Despite this, Thailand seized on the language in the Doha Declaration about TRIPS flexibilities to claim for itself the right to determine whether or not certain technologies should or should not be patented. That is the rationale they have used to break patents for seven patented medicines here in Thailand. 

Without getting into a political debate, the issue is really more one of rule of law. If a country like Thailand (one of the top 20 countries when it comes to GDP) can claim it is entitled to break patents for medicine, that creates a very slippery slope for the hundred countries that are behind Thailand in terms of wealth as measured by GDP, as to whether or not they are going to respect patents. Very well intentioned, well-meaning statements like what occurred at Doha can have unintended consequences. Those consequences can be very deceptive to an orderly administration and a predictable system of patent protection around the world. That is the big picture. 

The smaller picture is that occasionally, you get national legislation in one country that does have impacts on other countries. I refer to the example of the U.S., which has the annual review under its Office of the U.S. Trade Representative in the Executive Branch, where they categorize different countries as being on a watch list or priority watch list, and if they are habitual offenders of IP rights. The same is done by the Department of State in its Annual Report on Trafficking in Persons. Legislation like that sets important minimum standards and has dramatic effects in countries like Thailand, because it affects Thailand’s ability to obtain export preferences under what is called the generalized system of preferences or GSP. It makes Thai exported goods less competitive to those of, say, a neighbor and competitor like Vietnam, for example, which essentially exports the same types of products that we export. Because in the U.S. view Thailand does not respect IP as much as it can or should, Thai export goods are deemed less competitive than the Vietnamese exported goods. Thai export goods designated for the U.S. may be assessed with duties that make them less competitive with other countries’ exports, and have a negative effect on the local economy. Other examples include the law in France which criminalizes in some circumstances the possession of fakes. This tends to deter travelers from picking up the odd fake handbag in China or Thailand and risking having that item seized by French customs when they pass through France.

Because of the changes in Thailand in IP law, the attitudes of politicians and the courts and how foreign legislation impacts Thailand in terms of trade, there are growth opportunities for attorneys practicing IP law in Thailand. In the US it is not exceptional for leading IP firms to have many attorneys that are USPTO qualified; they have a science or technical background on top of their law degree, and they are very capable of understanding the technology that is involved in an IP case as well or even better than a non-lawyer with a master’s degree or PhD in that technology. In Thailand it is exceedingly rare and difficult to find lawyers with backgrounds in both science and law; it is usually either/or. So in future I think the marriage of those two specialties would be a tremendous competitive advantage for any young lawyer in Thailand to have. At least in my experience it seems that the technical or scientific degree usually comes first, together with some practical experience in the “art”. Then legal studies and a law degree come later, perhaps after exposure to patent law and practice while in a company that makes its money from innovation.

Thailand in the future will probably open up at least in some sectors of the law for foreign competition. We had a free trade agreement negotiation between the US and Thailand back in 2006 when we were trying to open up the services sector for Americans. That free trade agreement withered on the vine because of differences on the pharmaceutical issues and patent issues, but I think the trend will be that particularly for projects, banking and finance, you will see more foreign lawyers. 

I do not think you will see more foreign IP lawyers because there is a language barrier; you generally need to be able to speak, read, and write in Thai to practice IP law competently.  This is a barrier for many foreign lawyers and has always been the most challenging aspect of local practice for me. I think I know how to speak Thai but the version I speak is probably known by only two people in the world, myself and my wife. All the precedents are in Thai and all the proceedings in court are in Thai; all your dialogue with police and law enforcement, customs and government officials are in Thai. 

Unless you are a linguist, you have a limited opportunity to be an IP lawyer in Thailand. I hope to see the younger generation of Thai lawyers, for example, those I am training, eventually take positions of authority in the government, and they will shape and form policy in Thailand that is more progressive. The lawyers I have on my team and those in our leading competitor firms are just brilliant people, they are phenomenal. Most of them, just an observation, are women and even though they get threatened from time to time by these thugs, they are as tough as nails, while also being extremely bright and creative, and they see the big picture. I am very optimistic for the future, once this generation gets into some political power. 

The future will also require more international cooperation. Thai lawyers will need to work more closely with lawyers in China particularly Southern China and Hong Kong, Singapore, Turkey, Dubai, South Africa and in the U.S. The U.S. already has a very strong liaison with the Thai authorities. They have a full-time IP liaison here, and a number of trainers involved in training law enforcement and government officials on IP, so the U.S. is really exercising leadership in that area. The European Commission has an initiative called ECAP, where they have done the same thing in terms of capacity building and education awareness, an outstanding program. The Japanese have a long history of training the judges and patent examiners, and spend wisely in developing local talent in companies that they partner with, so U.S./EU and Japan are probably leaders in helping to bring Thailand up to a world class international standard in terms of IP sophistication. 

Where I expect to see more cooperation is in the countries that have traditionally been linked or involved in transnational traffic and illicit goods. Countries such as Dubai, South Africa, Belgium, Canada, Turkey, Russia, Pakistan and even New Zealand are countries where we tend to see goods that have passed through Thailand and moving on to their final destination. Those are also trans-shipment hubs. What will need to happen is to have a common database shared by customs and law enforcement where names and bio-data can be entered, all in a common language, to use to check shipments. For example, for shipments picked up in Dubai, a name is punched in and customs and law enforcement can see there is a warrant for the arrest in Thailand for that shipper, who is also a known counterfeiter from China. Right now there is very little communication between the different law enforcement communities in the region, and that is mostly because of the language barrier and of course issues of sovereignty. 

Turkey has their own database in different languages. I can access a database in English, Chinese, Vietnamese, Urdu and Arabic that can be accessed by law enforcement for transnational cases, provided that we are involved in the case or if there is reciprocity. We have to provide that service as part of a paid service for our client, so that type of cross-border cooperation is necessary to deal with this problem as it should be dealt with. Counterfeiting is a global problem, and law firms have to do their part, but real progress will mostly be seen mainly in enabling law enforcement around the world to have better support, communication and cooperation. 

 

Conclusion

 

I want to end by stressing that consumers have an important role to play because they have the ability to vote with their dollars to support socially conscious and responsible companies. If demand for fake goods decreases, the rush to supply such goods will also slow to a trickle. It’s a matter of social consciousness personal responsibility. The choice ultimately is the consumer's, but they need to have all the facts before they make the decision to support criminals who make fakes using abhorrent labor practices such as child, slave and bonded labor. 

Rights owners, lawyers, law enforcement, governments, consumers: all have a role to play in suppressing this insidious attack on our economy and way of life. The perpetrators and collaborators count on the apathy of bystanders and victims to view their crimes as harmless activity. Their very ability to continue the pernicious trade depends in large part on the silent complicity of the individual consumer who buys the knockoff.  Armed with awareness of the consequences of such purchasing on an aggregate scale, social conscience and consumer protest reaches a critical mass. Examples of social movements that have generated real change abound: anti-apartheid, pro-labor movements, universal suffrage, civil rights, debt relief, Live Aid, and even smaller scale niche reform areas like  PETA, dolphin safe tuna (my personal favorite, a lesson passed to me from my mother as she carefully scrutinized labels on cans on the supermarket shelves for the DST label) and the ASPCA. None of these reforms would have been possible if socially conscious persons had not rallied to English philosopher Edmund Burke’s famous call, “the only thing necessary for the triumph of evil is for good men to do nothing.”  

Consumers need to become educated shoppers and know how to recognize fakes through the "Three Ps": 

Package: Look at the quality of the product and its packaging. Watch for things like poor stitching, incorrectly spelled brand names or logos, etc.

Price: If the price is too good to be true, it probably is. 

Place: Brand name products are sold in stores or through the official company Web site, not on the streets or open air markets. 

 
 

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